Whatever shape Joe Hockey’s next budget takes after his poorly received first attempt, there are some things that are clear.
The Treasurer will be putting the budget together in a climate of soft economic growth, high unemployment, weak commodity prices and a declining Australian dollar.
Interest rates will probably be even lower as well.
Strangely, the word “emergency” also seems to be missing from the political lexicon after its frequent use before the coalition came to power.
In opposition, Mr Hockey scoffed when the Reserve Bank was forced to start cutting the cash rate to the “emergency level” of three per cent in 2012 because the economy was slowing.
It was a level only previously seen during the global financial crisis.
The cash rate now sits at a record low 2.25 per cent.
The RBA indicated this week the rate could fall to at least two per cent in the coming months.
The “E” word is mysteriously missing.
Similarly, under the previous Labor government, we apparently had a budget emergency, according to Mr Hockey.
Strangely, now the budget doesn’t matter that much in the broader scheme of things.
“The budget is not the be-all and end-all of the economic debate,” Mr Hockey said this week.
To be fair to the Treasurer, this was in reference to his intergenerational report released on Thursday, and the social policy debate he hopes it will generate among Australians.
But coinciding with Prime Minister Tony Abbott’s comments that his government has made a “very strong start” sorting out the budgetary mess when he is simultaneously ditching key planks of his first budget, it’s difficult to gauge where we go next.
But obviously, we shouldn’t be panicking.
No emergency, nothing to see here.
What we do know is the economy was limping along at an annual rate of 2.5 per cent at the end of 2014 and not by enough to generate employment growth that would put downward pressure on the jobless rate.
This week’s national accounts for the December quarter also showed the nation’s terms of trade, or national income, fell for a fourth consecutive quarter.
That will weigh on profits, wages and government revenues and result in soft consumer and government spending and business investment.
The winding back of mining investment also has a long way to run.
But Mr Hockey is confident the economy can remain on a positive trajectory helped by lower interest rates, petrol prices and the Australian dollar.
“We are in a good position to manage the transition in our economy,” he argues.
National Australia Bank chief economist Alan Oster told a conference this week the Australian consumer was still very nervous and worried.
And when you look further, they’re worried about the cost of living, especially utilities, education, housing and transport – all staples of modern life.
“This is very much an environment where you are giving the consumer more ability to spend but they may not do it,” Mr Oster says.
Even so, RBA governor Glenn Stevens has made it clear that while the central bank decided to leave the cash rate unchanged this week, another cut is still on the table.
It could mean a cash rate of two per cent or even 1.75 per cent, which has got to be close to an emergency in anyone’s language.